High Court Of Madras
CIT vs. Apcom Computers (P) Ltd.
Section 69
Asst. Year 1991-92
R. Balasubramanian & P.P.S. Janarthana Raja, JJ.
Tax Case (Appeal) No. 4 of 2004
17th October, 2006
Counsel Appeared :
J. Naresh Kumar, for the Appellant : V.D. Gopal, for the Respondent
JUDGMENT
P.P.S. Janarthana Raja, J. :
The present appeal is filed under s. 260A of the IT Act, 1961, by the Revenue, in ITA No. 2693/Mad/1994 against the order passed by the Tribunal, Madras, ‘C’ Bench for the asst. yr. 199192. When the matter came up for hearing on 19th Jan., 2004, this Court admitted the case formulating the following substantial questions of law :
“1. Whether, in the facts and circumstances of the case, the Tribunal was right in deleting the addition made to the closing stock, in respect of the difference between value of the stock reported to the bank and the IT return ?
Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the value of stock as reported by the assessee to its bank cannot be added to the value of the closing stock ?
Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the assessee can adopt one stock value for the bank purpose and other for the income-tax purpose ?”
2. The brief facts leading to the above questions of law are as under : The assessee is a private limited company. The assessee derives income from manufacture of tape back-up units for personal computers and computers. The relevant asst. yr. 1991-92 and the corresponding accounting year ended on 31st March, 1991. The assessee filed return of income on 19th Dec., 1991 disclosing a total income of Rs. 11,62,170. Later return was processed under s. 143(1)(a) of the IT Act (hereinafter referred to as the ‘Act’) determining the total income at Rs. 16,29,408. Subsequently, notice under s. 143(2) of the Act was issued. The AO completed the assessment under s. 143(3) and determined the total income at Rs. 16,46,620. While completing the assessment, the AO made an addition to the closing stock at Rs. 6,16,950 being the difference in value of the stock disclosed to the bank and disclosed in the accounts for the purpose of income-tax assessment. Aggrieved by the order, the assessee filed an appeal before the CIT(A). The CIT (A) allowed the appeal and set aside the order of the AO. Aggrieved by that order, the Revenue filed an appeal to the Income-tax Appellate Tribunal (hereinafter referred to as the ‘Tribunal’). The Tribunal dismissed the appeal filed by the Revenue and confirmed the order of the CIT(A).
Learned standing counsel appearing for the Revenue, submitted that the assessee had, in order to obtain higher loan facilities, inflated its stock figure in the statement given to the bank and, hence, the statement should be accepted. Hence, the AO is right in adding the difference between the two figures to the total income of the assessee.
Learned counsel appearing for the assessee submitted that for the purpose of bank loan, stock statement was given on estimate basis. The assessee maintained day-to-day accounts on production and the declared closing stock for assessment purpose, was based on actual physical verification. Hence, the estimated value of the stock given to the bank cannot be taken as the correct value of stock.
Heard the counsel. Any addition on account of difference in stock can be made only on adequate materials, but not arbitrarily. Admittedly, there was a difference between the value of closing stock declared to the bank and to the IT authorities. There is no dispute that the assessee was maintaining books of account on day-to-day production. The assessee, in the present case, has taken the actual physical stock for the purpose of declaring closing stock to the IT authorities. Further the purchases and sales were supported by vouchers and the AO had not pointed out any suppression of sales or purchases. There was a finding by the authorities below that the statement given to the bank was on estimate basis without any actual physical verification and the same was not supported by books of account. We find there is evidence to show that stock declared to the IT Department was supported by books of account. No detailed inventory was also available in the statement made to the bank. Except a mere value declared for overdraft purposes to the bank, there were no detailed items of stocks in support of the declared value. It was also pointed out that there was no physical verification of stock, either by the assessee or the bank at the time of furnishing the stock statement. The Tribunal as well as CIT(A) (has) given a concurrent finding that the assessee declared closing stock for assessment purpose which is based on actual physical verification. There is enough material available on record and the conclusion reached by the Tribunal is based on valid material and evidence.
In view of the same, there is no basis to treat the difference in value as the assessee’s undervaluation of stock or undisclosed income. The Tribunal also rightly followed the principles enunciated by this Court judgment in the case of CIT vs. Sri Padmavathi Cotton Mills (1998) 148 CTR (Mad) 371 : (1999) 236 ITR 340 (Mad).
In view of the foregoing reasons, we are of the view that there is no error or legal infirmity in the order of the Tribunal so as to warrant interference. Hence, we answer the questions of law in favour of the assessee and against the Revenue and the tax case is dismissed. No costs.
[Citation : 292 ITR 630]
